Oryx Petroleum has announced its financial and operational results for the year ended December 31, 2019.
The Corporation also announces agreements with AOG International Holdings Limited ("AOG") to amend the Loan Agreement dated March 13, 2015 and to establish a new short term credit facility. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.
2019 Financial Highlights:
- Total revenues of $150.5 million on working interest sales of 2,780,800 barrels of oil ("bbl") and an average realised sales price of $48.72/bbl for 2019
- 54% annual increase in revenues versus 2018
- Q4 2019 revenues increased 14% versus Q3 2019
- The Corporation has received full payment in accordance with Production Sharing Contract entitlements for all oil sale deliveries into the Kurdistan Oil Export Pipeline through September 2019
- Operating expenses of $28.9 million ($10.41/bbl) and an Oryx Petroleum Netback(1) of $18.90/bbl for 2019
- 17% decrease in operating expenses per barrel versus 2018
- Loss of $59.2 million ($0.11 per common share) in 2019 versus Profit of $43.8 million in 2018 ($0.09 per common share)
- Loss in 2019 primarily attributable to an impairment expense related to the Hawler license area and an impairment expense and a provision related to the Corporation's former interest in the Haute Mer B license area
- Profit in 2018 primarily attributable to an impairment reversal related to the Hawler license area
- Net cash generated by operating activities was $28.1 million in 2019 versus net cash generated by operating activities of $8.1 million in 2018 comprised of Operating Funds Flow(2) of $26.9 million and an $1.2 million decrease in non-cash working capital
- Net cash used in investing activities during 2019 was $35.1 million including payments related to drilling and facilities work in the Hawler license area, preparation for drilling in the AGC Central license area, and an increase in non-cash working capital
- $8.9 million of cash and cash equivalents as of December 31, 2019
- Oryx Petroleum Netback is a non-IFRS measure. See the table below for a definition of and other information related to the term.
- Operating Funds Flow is a non-IFRS measure. See the table below for a definition of and other information related to the term.
2019 Operations Highlights:
- Average gross (100%) oil production of 11,700 bbl/d (working interest 7,600 bbl/d) for the year ended December 31, 2019 versus 6,500 bbl/d (working interest 4,200 bbl/d) for the year ended December 31, 2018
- 80% increase in gross (100%) oil production in 2019 versus 2018; 12% increase in gross (100%) oil production in Q4 2019 versus Q3 2019
- Successful completion of four producing wells during 2019
- First successful completion of a well targeting the Cretaceous reservoir at the Demir Dagh field utilising a horizontal well design
- Gross (working interest) proved plus probable oil reserves of 103 million barrels as at December 31, 2019
- Environmental and Geohazard Assessments related to planned drilling in the AGC Central license area initiated and largely completed
2020 Operations Update:
- Average gross (100%) oil production of 14,500 bbl/d (working interest 9,400 bbl/d) and 14,400 bbl/d (working interest 9,400 bbl/d) in January and February 2020, respectively
- The drilling of a horizontal sidetrack of the previously drilled Banan-1 well in the portion of the Banan field east of the Great Zab river was completed in early 2020
- Data obtained during drilling indicate that the Tertiary reservoir in the eastern portion of the Banan field contains oil of similar density to oil produced from the Tertiary reservoir in the portion of the Banan field west of the Great Zab river
- Attempts to complete the well as a producer in the Cretaceous reservoir were unsuccessful
- Further drilling targeting both the Tertiary and Cretaceous reservoirs is planned in 2020
- Operations in recent weeks were successful in shutting off water production from the Banan-5 well which is producing oil from the Cretaceous reservoir in the portion of the Banan field west of the Great Zab river
- The worldwide outbreak of the COVID-19 virus, including within Iraq, has not impacted operations. The Corporation is taking precautions to protect its employees and contractors but does not at this time expect that the virus outbreak will restrict operations
- The planned drilling of an exploration well in 2020 in the AGC Central license area has been deferred. In 2019, the Corporation requested that the First Renewal Period of its Production Sharing Contract (due to end on October 1, 2020) be extended as a result of ongoing negotiations between Senegal and Guinea Bissau in relation to the accord governing the jointly-administered area offshore Senegal and Guinea Bissau. The Corporation is currently in discussions with the AGC regarding an amendment to its Production Sharing Contract that would implement the requested extension and expects the amendment to be finalised in the coming months.
2020 Forecasted Work Program and Capital Expenditures:
- 2020 capital expenditure forecast of $53 million (versus $106 million budget). Forecast activities consist of:
- $50 million dedicated to the Hawler license area: six wells including two wells targeting the Banan Cretaceous reservoir, one well targeting the Zey Gawra Tertiary reservoir, one well targeting the Demir Dagh Cretaceous reservoir, one well targeting the Banan Tertiary reservoir, and a completion of the previously suspended Ain Al Safra-2 well; a pipeline connecting the Banan field to the Hawler production facilities at the Demir Dagh field; storage tanks at the Hawler production facilities and pads, flowlines and infrastructure modifications needed to accommodate incremental drilling and production and to reduce operating costs
- $3 million dedicated to the AGC Central license area including studies, technical support and license maintenance costs
- The forecast reflects the deferment of planned drilling in the AGC license area and the deferment of two wells and certain facilities expenditures in the Hawler license area that were included in the budget.
Extension of AOG Loan and New Short Term Credit Facility:
- AOG has agreed to extend the maturity date of the credit facility provided to Oryx Petroleum in 2015 from July 1, 2020 to July 1, 2021 in consideration for the issuance of 33,149,000 warrants to purchase common shares of Oryx Petroleum. The Toronto Stock Exchange ("TSX") has reviewed the applicable transaction materials. It is anticipated that the TSX will conditionally approve the extension five business days after the issuance of this news release.
- AOG has further agreed to provide the Corporation with a $5 million short term credit facility to provide access to working capital in the event of any further delays in receiving payments for oil sales. The TSX has reviewed the applicable transaction materials. It is anticipated that the TSX will conditionally approve the short term credit facility five business days after the issuance of this news release.
- The Corporation expects cash on hand as of December 31, 2019 and cash receipts from net revenues and export sales will allow it to fund its forecasted capital expenditures and operating and administrative costs into early 2021. Additional capital is expected to be required to be able to both meet any contingent consideration obligations that become payable and to fund drilling in the AGC Central license area now planned in 2021.
Commenting today, Oryx Petroleum's Chief Executive Officer, Vance Querio (pictured), stated:
"2019 was a good year for Oryx Petroleum. During the year we substantially increased production from the Hawler license area thanks to the successful completion of four new producing wells, increasing production from the Banan and Demir Dagh Cretaceous reservoirs. One of the four new wells was a sidetrack of the previously drilled Demir Dagh-3 well utilizing a horizontal well design that is integral to our development plans for the Cretaceous reservoirs in the Hawler area fields.
"In the AGC Central license area, that has best estimate unrisked gross (working interest) prospective oil resources of 2.2 billion barrels, we continue to prepare for exploration drilling. In 2019 we initiated and now have largely completed environmental impact and geohazard assessments with regards to our drilling plans. However, the timing of exploration drilling remains uncertain as we wait for Senegal and Guinea Bissau to agree on a renewal or extension of the accord governing the jointly-administered offshore area. We fully expect that an agreement will be reached but the timing is uncertain.
"Importantly, we completed our work in 2019 without incurring any Lost Time Injuries or having any significant releases or other adverse environmental incidents.
"Our 2020 capital program is focused primarily on the Hawler license area in the Kurdistan Region of Iraq where our program includes the drilling or re-entry of six wells and has been designed to allow us to increase production and to better define the remaining development potential of the four fields in the license. We have completed the sidetrack of the Banan-1 well in recent weeks and expect to spud a second well in the late Spring. In the AGC Central license area, our forecasted capital expenditures include costs related to studies and preparations for exploration drilling in 2021 assuming the AGC accord is renewed or extended in 2020.
"The combination of higher production and regular payments for oil sales in most of 2019 resulted in higher funds flow which together with cash on hand allowed us to fund our business in 2019 without seeking additional capital. We expect that cash on hand and cash receipts from net revenues will fund forecasted capital expenditures and operating and administrative costs into early 2021. AOG, our largest shareholder, has recently agreed to provide us with a short term credit facility to strengthen our liquidity position due to the recent delays in receiving cash payments for oil sales. Most of our capital expenditures are planned in the second half of 2020 and we are prepared to adjust our plans and consider other measures to strengthen our liquidity should recent market developments persist and should there be additional delays in cash receipts for oil sales.
"We look forward to implementing our plans safely in 2020 and to higher production in the Hawler license area while continuing to prepare for an exploration drilling program in the AGC Central license area."